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| Helle Bank Jorgensen |
Developing risk mitigation strategies for longer-term resilience will become a higher priority. Ultimately, it was recognized that it is the time, now more than ever, to (re) establish purpose-driven corporations.
The roster of 75 global leaders and board members that Competent Boards polled on what they considered, in the middle of the pandemic, to be the highest priority short, medium and long-term considerations needed to help leaders, anticipated the following changes in governance roles in order to remain resilient in the long term:
1. Governance roles will evolve to include industrial and public advocacy, in order to make “markets work for a company’s redefined purpose.” This is a key mission: business to define a new “social compact” with society and government to create a comprehensive, facilitative market ecosystem.
2. Board members should consider again the responsibilities that they have with the company and its management and people, shareholders and different stakeholders. They must realize the need to lobby in order to modify and redefine both governance and regulation. This must be self-generated and come from within.
3. Every board will have a committee that oversees entity-level risks, and many will have pandemic response teams or crisis teams in which pandemics are included.
4. Corporate strategies will all have to be reset and reconsidered for companies to remain resilient in the long term.
5. Expanding the parameters of business considerations to include climate change is a given.
6. Value chains must be reviewed in order to implement any changes needed in the future; crises like this are an opportunity for such renewed efforts.
7. Consider how sustainability initiatives may be incorporated into a company’s purpose-led restart.
8. Boards must now favour diversity and favour personal traits that support resilience, courage, ownership, curiosity, culture and adaptability.
9. The stakeholder ecosystems will become more interconnected, and as a result, expand the corporation. Good corporate governance that embraces long-term resiliency will encourage the building of a capability that includes the voice of stakeholders.
10. For struggling economies affected prior to COVID-19: Corporate leaders must be committed to conscious steps that preserve the long-term health of the company. The only way to achieve this given the sea changes underway is to engage the company’s stakeholders in dialogue about the trade-offs, choices, dilemmas and compromises facing the company.
11. Consider passive or active mergers and/or acquisitions.
The majority of leaders around the world agreed that should we resume economic activity in the same manner that it has always been, the world as we know it will likely continue to plunge deeply into the upcoming crisis of climate change. Similar to COVID-19, climate change is a pandemic that knows no borders and has the capacity to impact us in a more cataclysmic manner than COVID-19.
The global leaders supporting Competent Boards have provided us with many innovative ideas. First among those was the idea to restart economies while advancing climate change solutions. The most frequently expressed ideas were 1) the need for a globally agreed taxonomy and registry of non-financial information, and 2) a comprehensively agreed integrated reporting framework to create a degree of comparability. The impact and role of the financial sector was commonly acknowledged, and it was recognized that future institutions must continue to be guided by the sustainable development goals (SDGs) as they actively embed these assumptions, visions, values and strategic plans.
Furthermore, global leaders suggested the following ways to restart economies that will lead to climate challenge solutions and advance the SDGs:
1. Governments and business leaders alike will need to build and shape coalitions for collective action on a global scale.
2. A new social contract for “better impact” must be adopted to develop and use innovative financial and social instruments/methods in the post-crisis economic recovery.
3. Businesses can take the initiative to come up with proposals to the government that emphasize “Making Markets Work for Purpose” and realizing the SDGs.
4. Promote a coherent, comprehensive, facilitative regulatory fiscal policy, and practice markets’ framework with key principles such as: ethical multicapitalism, multistakeholder involvement, risk and impact returns on investment, advanced integrated reporting.
5. Adopt advanced (risk and impact) reporting, true pricing, circularity and regenerative economy principles.
6. With regards to economic stimulus credits: Debt forgiveness for emissions reductions could be provided retroactively, providing an additional benefit to the stimulus relief. This could be aimed at carbon emitters first — a transition-first carbon reduction incentive.
7. Strive for a more inclusive, equitable and sustainable economic model.
8. Businesses must take an active role in national/regional/local social programs through volunteering by staff and philanthropic contributions.
This is the second of a two-part series. Read part one: In case of emergency, break glass: New priorities for governing boards.
Helle Bank Jorgensen, hbj@competentboards.com, is the CEO of Competent Boards Inc., which offers the global online Competent Boards Certificate Program, that helps leaders identify and proactively act upon material ESG, Climate and Sustainability risks and opportunities. She is an experienced board facilitator, board member and serves on His Royal Highness Prince of Wales A4S Global Expert Panel as well as WBCSD Governance & Internal Oversight High-Level Advisory Group. She is a business lawyer and state-authorized public accountant by training.
Photo credit / AlexLMX ISTOCKPHOTO.COM
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